EUR/USD Potential Further Decline If Daily EMA 50 Breached

EUR/USD (daily chart as of March 26, 2014) retreated from the high of 1.3966 and reached the first downside target (daily EMA 50) mentioned in our March 17 analysis. The pair has been managed to hold the daily EMA 50 for six trading sessions.

If price breaks down below the daily EMA 50, that would trigger another short position with a potential target (second downside target) at the medium-term uptrend line (line 2 on chart) or the daily EMA 200, with tight stop loss above the daily EMA 50.

If price bounces off the daily EMA 50 with strong upside momentum, it would invalidate this short-term bearish outlook. The currency pair is under pressure below 1.3850/80 amid signs of additional stimulus monetary policy being considered by the ECB.

Support levels below:

1st support: daily EMA 50

2nd support: 1.3640 (February 27 low)

3rd support: line 2 or daily EMA 200

Resistance levels above:

1st resistance: 1.3850/80 (multiple highs and lows)

2nd resistance: 1.3966 (March 13 high)

3rd resistance: resistance line 1